Euro zone debt jitters thump Britain’s FTSE 100

By Simon Falush

LONDON (BestGrowthStock) – Mounting fears on euro zone debt and doubts about the global economic recovery sent investors fleeing from riskier assets, shoving Britain’s top share index 1.7 percent lower by Thursday’s close.

In a volatile session, the FTSE 100 ended down 84.95 points at 5,073.13, its lowest close since February 5 having fallen 2.8 percent on Wednesday.

But the index fell as much as 3 percent and touched a low of 5,000.76 in heavy trade, with 140 percent of the average of the last 90 days transacted.

The inability of euro zone leaders to agree on policy, highlighted by Germany’s unilateral decision on Tuesday to ban naked short-selling, has ramped up fears about whether the bloc will be able to effectively tackle its debt crisis.

This has hit the euro, lifted the yen and U.S. Treasuries

and contributed to a 9.3 percent fall for Britain’s blue-chip index this month, on track for its biggest monthly fall since March 2009.

“Investor uncertainty is leading to a flight to quality and safe havens,” said Peter Dixon, economist at Commerzbank.

“Dumping stocks seems sensible with so much uncertainty on the macro environment, and all fundamental ways of looking at value are out of the window.”

Miners, among the most sensitive stocks to risk aversion, were the biggest drag on the index, hurt by weaker metal prices and a downbeat note on the sector from BofA Merrill Lynch.

Rio Tinto and Xstrata, which were both cut by the broker to “neutral” from buy” fell 3.6 and 2.7 percent respectively, while Kazakhmys and Vedanta, which Merrill Lynch double downgraded, fell 5.8 and 4.3 percent respectively.

Investors, already rattled by worries on the euro zone debt crisis, were further unnerved by weaker then forecast U.S. employment data released in afternoon trade.

The number of U.S. workers filing new applications for unemployment insurance unexpectedly rose last week for the first time since early April, suggesting the labor market recovery has hit a stumbling block.

BANKS RETREAT

Banks, already one of the biggest casualties of the sovereign debt problem in Europe, retreated again. Barclays, Royal Bank of Scotland and Lloyds Banking Group fell 0.8 to 2.5 percent.

National Grid shed 7 percent, the top blue-chip faller, after the utility announced a rights issue to raise 3.2 billion pounds.

Scottish & Southern Energy dropped 3.1 percent after Exane BNP Paribas downgraded its rating to “neutral” from “outperform” and revised its market share growth forecasts, following the energy firm’s results on Wednesday.

Brewer SABMiller fell 6 percent after saying it expected consumer spending to recover only toward the end of 2010, as it reported an adjusted earnings per share of 161.1 U.S. cents, narrowly missing forecasts.

Among a meager list of gainers, BT Group, gained 0.5 percent, lifted by an upgrade from Royal Bank of Scotland.

Energy stocks were the only significant positive on the index. Heavyweight BP gained 1 percent with traders citing short covering after a sharp sell-off on concerns about the cost of cleaning up a massive oil spill in the Gulf of Mexico. Peer Royal Dutch Shell advanced 0.4 percent.

Stock Market Report

(Editing by Jon Loades-Carter)

Euro zone debt jitters thump Britain’s FTSE 100